WHAT HAPPENS WHEN YOU PERFORM UNPERMITTED WORK? Kyle W. Ohlenschlaeger and Bruce E. Loren | Aug 16 2019

In our experience, the failure to obtain a building permit comes down to one of three excuses. The first is that the contractor didn’t want to deal with difficulties and intrusions from the municipality. The second excuse is that the contractor didn’t think the work required a permit. The final excuse is that the customer didn’t want to get a permit, and directed the contractor not to obtain one. These excuses can subject the contractor to significant penalties and place the contractor at a severe disadvantage when disputes arise in connection with the work.

The first two excuses are easily dealt with. As a licensed contractor, obtaining a permit and dealing with the municipality’s intrusion is part of your job. If you expect difficulty with the municipality, raise your price to compensate for that intrusion. Moreover, the work requires a permit over 99% of the time. Even if the work doesn’t require a permit, it is worth obtaining one simply to avoid the headache associated with the consequences discussed below.

The third excuse, owners and/or customers asking for the work to be done without a permit, should be a significant red flag. In many cases, if the customer cannot pay a few hundred extra dollars to obtain a permit, the contractor will find themselves in a payment dispute later anyway. Many customers also intentionally try to bait contractors into performing work without a permit to later use it as leverage to avoid paying for the work. Therefore, in most cases, it is not worth the trouble of working with a customer that refuses to get a permit.

Licensure Penalties

The most obvious consequence of a contractor’s failure to obtain a permit is that it is a violation of its license, the Florida Statutes associated with the contractor’s license, and Department of Business and Professional Regulation ("DBPR") rules. Under applicable DBPR guidelines, the minimum penalty for a first violation is a $1,000 fine, while the maximum penalty includes a $5,000 fine and probation. Subsequent violations carry a minimum of a $5,000 fine with maximum penalties of $10,000 fines plus suspension or revocation of the contractor’s license.

Municipal Remedies

In addition to problems with the DBPR, the municipality also has its own remedies available to combat unpermitted work. In some cases, the building department may only require that the contractor pull a permit after the fact and execute an affidavit confirming that all work was performed in accordance with applicable building codes. However, the building department has discretion, and can force the contractor to remove the work and rebuild to conform with local rules. Generally, the contractor is in the unenviable position of having to re-do its work without any compensation from its customer—even if the customer requested that the work be done without a permit.

Difficulties Associated with Collection from the Customer

There is case law suggesting that a contractor’s failure to obtain a building permit means that the contractor has failed to substantially complete its contract. As a result, customers argue that a contractor that fails to obtain a building permit is not entitled to payment under the contract or any lien rights. As indicated above, some customers will attempt to bait a contractor into performing unpermitted work solely to avoid payment later.

The primary case that customers reply upon is an extreme example of a contractor violating permitting requirements. The contractor in question was required to pull a permit under the contract, actually applied and had the permit rejected for noncompliance with building code but performed the work anyway. When the municipality discovered what had been done, they forced the owner to remove the structure. When the contractor filed a lien and sued for nonpayment, the court held that the contractor was not entitled to enforce its lien because it failed to substantially complete its contract. As a result, the contractor received no payment and had to pay the customer’s attorney’s fees.

However, even when these extremes are not met, customers have a compelling argument that the contractor is not entitled to payment. First, even if the contract doesn’t specifically require permits, customers will argue that it is an implied requirement of the contract that arises from statutory and licensure requirements. Moreover, because there is so little law on the subject, it is hard to tell where courts will draw the line and require payment for unpermitted work. At minimum, the failure to obtain a permit will drive up the expense and length of litigation concerning nonpayment, and will often result in the contractor settling cases for far less than it is owed.

Whatever your excuse, performing unpermitted work is not worth it. Though contractors may get away with performing unpermitted work some of the time, they will eventually come across either the DBPR, a municipality or a customer that makes the contractor pay. On the other hand, obtaining a permit is relatively simple and contractors should be building the cost, including the cost of the municipality’s intrusion into the project, into the price charged to their customer.

Bruce E. Loren and Kyle W. Ohlenschlaeger of the Loren & Kean Law Firm are based in Palm Beach Gardens and Fort Lauderdale. Loren & Kean Law is a boutique law firm concentrating in construction law, employment law, and complex commercial litigation. Mr. Ohlenschlaeger focuses his practice on construction law and a wide range of commercial litigation disputes. Mr. Loren has achieved the title of "Certified in Construction Law" by the Florida Bar, exemplifying the Bar’s recognition of this expertise. The firm’s construction clients include owners/developers, general contractors, specialty contractors in every trade, suppliers and professional architects and engineers. Mr. Loren and Mr. Ohlenschlaeger can be reached at bloren@lorenkeanlaw.com or kohlenschlaeger@lorenkeanlaw.com or 561-615-5701.